Correlation Between Syntax and Simplify Equity

Can any of the company-specific risk be diversified away by investing in both Syntax and Simplify Equity at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Syntax and Simplify Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Syntax and Simplify Equity PLUS, you can compare the effects of market volatilities on Syntax and Simplify Equity and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Syntax with a short position of Simplify Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Syntax and Simplify Equity.

Diversification Opportunities for Syntax and Simplify Equity

0.06

Correlation Coefficient

Syntax  Simplify Equity

Significant diversification

The 3 months correlation between Syntax and Simplify is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Syntax and Simplify Equity PLUS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Equity PLUS and Syntax is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Syntax are associated (or correlated) with Simplify Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Equity PLUS has no effect on the direction of Syntax i.e., Syntax and Simplify Equity go up and down completely randomly.

Pair Corralation between Syntax and Simplify Equity

Given the investment horizon of 90 days Syntax is expected to generate 1.72 times less return on investment than Simplify Equity. But when comparing it to its historical volatility, Syntax is 1.07 times less risky than Simplify Equity. It trades about 0.05 of its potential returns per unit of risk. Simplify Equity PLUS is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,111  in Simplify Equity PLUS on October 3, 2024 and sell it today you would earn a total of  982.00  from holding Simplify Equity PLUS or generate 31.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	76.03%
Values	Daily Returns

Syntax  vs.  Simplify Equity PLUS

Syntax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Syntax has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Syntax is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Simplify Equity PLUS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Simplify Equity PLUS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Simplify Equity is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Syntax and Simplify Equity

The main advantage of trading using opposite Syntax and Simplify Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Syntax position performs unexpectedly, Simplify Equity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Simplify Equity will offset losses from the drop in Simplify Equity's long position.

The idea behind Syntax and Simplify Equity PLUS pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.